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TheStreet Open House

Metals, Not Miners, Are This Week's Villains

Gold and silver prices plummeted this week on a spike in the value of the U.S. dollar.

For the five trading days ending Thursday, Aug. 14, the U.S. dollar index gained 2.85% against the basket of major currencies. Over the same period gold cast off 7.61% of its luster while the sliver meltdown sliced off 12.50%.

Pulling back a bit, we can see that the U.S. dollar bottomed in mid-March. At that time, gold topped out at $1,032.70 with silver at $21.36 per ounce. With gold falling 33.62% and silver falling 21.89% from their highs, these two precious metals have entered bear market territory.

Gold and Silver in Bear Market

Click here for larger image.

In this new bear market, the average precious metals fund we track lost 6.09% for the week ending Thursday, Aug. 14. At the same time, the benchmark Philadelphia Gold & Silver Index of mining shares shed 5.64%.

But this week, the worst-performing funds in this sector are not the mining shares that are usually more volatile than the underlying metal. This time the price movements of gold and silver outpaced the mining companies that still should still be profitable at the relatively high current spot prices for the metals.

Leading the losers with double-digit losses, the iShares Silver Trust (SLV), off 12.51%; PowerShares DB Silver Fund (DBS), down 12.19%; and the E-TRACS UBS Bloomberg CMCI Silver ETN (USV) sliding 10.67%, all track the bullion price of silver.

Worst-Performing Precious Metals Funds for the Week Ending Thursday Aug. 14
Fund Ticker Rating Fund Type 1 Week Total Return
iShares Silver Trust SLV B- ETF -12.51%
PowerShares DB Silver Fund DBS A ETF -12.19%
E-TRACS UBS Bloomberg CMCI Silver ETN USV U ETF -10.67%
iPath DJ-AIG Precious Metals Tot Retn Sub-Index ETN JJP U ETF -9.34%
ELEMENTS Linked to the MLCX Gold Total Return Index GOE U ETF -9.25%
PowerShares DB Precious Metals Fund DBP A+ ETF -8.52%
ProFunds Precious Metals UltraSector ProFund PMPIX C- Open-End -8.47%
Market Vectors Gold Miners ETF GDX B ETF -7.84%
SPDR Gold Trust GLD A+ ETF -7.83%
iShares COMEX Gold Trust IAU A+ ETF -7.72%
Source: Bloomberg & TheStreet.com Ratings

Only two funds on the best-performing precious-metals list this week managed to gain ground. They bucked the trend of imploding commodity prices on weaker expected economic demand.

First, the iPath Dow Jones-AIG Nickel Total Return Sub-Index ETN (JJN) added 2.01% for the week. This roughly corresponds to the 1.81% increase in the spot price of nickel on the London Mercantile Exchange to $19,088 per metric ton.

The only other precious-metals fund avoiding a loss is the Gabelli Global Gold Natural Resources & Income Trust (GGN) hovering at a positive return of 0.36%. The appreciation in fund's 36% allocation to oil & gas stocks balanced out the depreciation of the 60% of fund assets invested in mining shares.

Even with spot platinum prices down 5.36%, two of the fund's holdings of Johannesburg platinum miners Impala Platinum (INPUY) and Anglo Platinum (AGPPY) rose 12.02% and 3.05% respectively on rumblings of impending takeover bids from BHP Billiton (BHP).

Best-Performing Precious Metals Funds for the Week Ending Thursday Aug. 14
Fund Ticker Rating Fund Type 1 Week Total Return
IPATH Dow Jones AIG Nickel Total Return Sub Index ETN JJN U ETF 2.01%
Gabelli Global Gold Natural Resources & Income Trust GGN B+ Closed-End 0.36%
iPath Dow Jones AIG Copper Total Return Sub Index ETN JJC U ETF -3.05%
SPDR S&P Metals & Mining ETF XME B+ ETF -3.28%
RiverSource Precious Metals and Mining Fund INPMX C Open-End -3.28%
Vanguard Precious Metals and Mining Fund VGPMX B+ Open-End -3.38%
iPath Dow Jones-AIG Aluminum Total Return Sub-Index ETN JJU U ETF -3.61%
Oppenheimer Gold & Special Minerals Fund OPGSX B- Open-End -3.88%
iPath DJ-AIG Industrial Metals Total Return Sub-Index ETN JJM U ETF -3.96%
US Global Investors Gold and Precious Metals Fund USERX B Open-End -4.53%
Source: Bloomberg & TheStreet.com Ratings

For an explanation of our ratings, click here.

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Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

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